Can Gold Keep Its Luster in 2013?

Gold took a double hit recently based partly on a news item from the rumor
mill that a large fund in Asia was selling to "run the stops."

"The sale looks like a carefully crafted trade prepped and successfully executed
by a well known $14b US fund," according to one source. "Prior to the sale
there had been an unusually large purchase of gold 'puts' - a leveraged options
play that profits from a downward spike in prices. There had also been some
early selling on the overnight electronic platform presumably to test the waters
before the big guns fired a devastating salvo."

The short sell at the opening bell last week had the desired effect on prices,
as the $1,730 level was breached where it triggered stops. The reason behind
the trade is a matter of speculation with no clear motive. One source believed
the selling was a bet that the U.S. "fiscal cliff" will be averted and that
both sides of the Congressional isle will be able to reconcile their differences
long enough to meet the upcoming deadline for the expiration of the Bush tax
cuts.

This brings up another question concerning the 2013 outlook for gold. Pundits
believe that if the fiscal cliff is averted and the U.S. economy picks up steam
in the coming months that it could put downside pressure on the yellow metal.

Many analysts have also called into question whether the 17% year-over-year
compounded rise in the gold price over the past decade can be sustained going
forward. Perhaps not, but as Sharps Pixley points out, "Some bulls now seem
to see single digit growth as a bear market." The point here being that even
a single digit gold price increase in 2013 would still be preferable to an
outright bear market and is still an attainable gold.

Analysts' median forecast for the 2013 year-end gold price has risen from
$1,832 as of September to $1,850 currently. Commerzbank expects gold to reach
$2,000/oz next year, citing supporting factors such as additional central banks
buying due to ultra-loose monetary policy or addition to reserves, more active
Indian buyers, continued low real interest rates, a rebound in Chinese growth
rate. Deficits in the gold supply are also expected to continue into 2013.

From a technical perspective, the 10-month gold price oscillator showed some
improvement in early December from last month, falling back from the "overbought" red
zone shown in the following graph to a neutral reading in the yellow zone.
That should help gold to stabilize a bit in the coming days and weeks as the
metal tries to establish support and chew its way through the supply overhang
created by recent selling.

It should be noted that despite the recent sell-off, gold is currently showing
a net gain for the year-to-date (as of Dec. 4). The iShares Gold Trust (IAU),
our proxy for gold, is above its opening level from the start of 2012 as you
can see here. But it's also below its 30-day moving average, and this important
trend line also has a downward slope. It's also below the 60-day MA. This signifies
that the interim trend is still sketchy and the buyers haven't regained control
of the market yet. The best trading signals - the ones that signal a sustainable
rally has begun - are when the gold ETF is above the rising 30-day and 60-day
moving averages.

U.S. Economy

A few weeks ago our New Economy Index (NEI) was looking dicey. I even speculated
that by December we might even see a "sell" signal in the NEI - the first one
since 2010. But as the latest NEI update shows the U.S. retail economy is still
managing to maintain its intermediate-term rising trend and shows no sign of
breaking down.

As you can see, the index remains above its rising 12-week and 20-week moving
averages as well as staying above the interim uptrend line (see below). That
means that the outlook for U.S. retail sales in the near term future is still
positive, and it practically guarantees a fairly strong holiday sales trend
for December. So it looks like Santa is coming to the rescue this year once
again for retailers.

2014: America's Date With Destiny

Take a journey into the future with me as we discover what the
future may unfold in the fateful period leading up to - and following - the
120-year cycle bottom in late 2014.

Picking up where I left off in my previous work, The Stock
Market Cycles, I expand on the Kress cycle narrative and explain how
the 120-year Mega cycle influences the market, the economy and other aspects
of American life and culture. My latest book, 2014: America's Date With
Destiny, examines the most vital issues facing America and the global
economy in the 2-3 years ahead.

The new book explains that the credit crisis of 2008 was merely
the prelude in an intensifying global credit storm. If the basis for my prediction
continue true to form - namely the long-term Kress cycles - the worst part
of the crisis lies ahead in the years 2013-2014. The book is now available
for sale at:http://www.clifdroke.com/books/destiny.html

Order today to receive your autographed copy and a FREE 1-month
trial subscription to the Gold & Silver Stock Report newsletter. Published
twice each week, the newsletter uses the method described in this book for
making profitable trades among the actively traded gold mining shares.

Clif Droke is the editor of Gold & Silver Stock Report, published
each Tuesday and Thursday. He is also the author of numerous books, including
most recently, "Gold & Gold Stock Trading Simplified." For more information
visit www.clifdroke.com

Clif Droke is a recognized authority on moving averages and internal
momentum. He is the editor of the Momentum Strategies Report newsletter,
published since 1997. He has also authored numerous books covering the fields
of economics and financial market analysis. His latest book is Mastering
Moving Averages. For more information visit www.clifdroke.com